Reuters blog archive
The bombardment of European Central Bank interventions continues today. ECB chief Mario Draghi addresses the European Banking Congress in Frankfurt and any number of his colleagues break cover elsewhere.
Draghi shepherded a surprise interest rate cut earlier this month and consistently says that other options are on the table though yesterday he said that talk of cutting the deposit rate into negative territory to try and force banks to lend more was people “creating their own dreams”.
Having said that, the prospect of printing money has been raised, at least in principle, and the markets still expect a new round of long-term liquidity pumped into the banking system – a repeat of last year’s LTROs – early next year. Anything more would be hugely difficult for Germany and its fellow travellers to swallow.
German Finance Minister Wolfgang Schaeuble talks at the same conference and staked out his ground yesterday, saying the ECB must not offer "false stimulus" and that monetary policy alone would not solve the euro zone crisis – a fairly clear warning off thoughts of QE.
A round of European Central Bank policymakers speeches this week can be boiled down to this. All options, including money-printing, are on the table but it will be incredibly hard to get it past ECB hardliners and neither camp sees a real threat of deflation yet.
Reports that the ECB could push deposit rates marginally into negative territory in an attempt to force banks to lend have been played down by our sources, not least because it would distort the working of the money market.
from The Great Debate:
Germans are not naive: They know that states spy, and that attempts to listen in to Chancellor Angela Merkel's conversations were to be expected. But they didn’t expect that the United States would do this, for a decade.
Trust needs to be rebuilt. We must go beyond an exchange of accusations and counter-accusations over this issue. As allies and democracies, the United States and Germany can do this, with some imagination and effort, and the relationship can be improved as a result.
The decision by one of Silvio Berlusconi's key allies to break from his party and back Prime Minister Enrico Letta's fragile coalition appears to have shored up the Italian government with a final vote on expelling the media magnate from public life looming large.
Berlusconi said on Saturday his rump centre-right party had split from the coalition but did not have the numbers to bring it down.
Angelino Alfano, interior minister and deputy premier, said all five of the centre-right ministers under his umbrella would stay in the government but there is still plenty of disagreement within the coalition about the 2014 budget and doubts about Letta’s ability to push through meaningful economic reforms.
Reuters reported over the weekend that Angela Merkel’s Conservatives and the centre-left SPD had agreed that a body attached to European finance ministers, not the European Commission, to decide when to close failing banks.
At the risk of blowing trumpets this will make the euro zone weather in the week to come and could open the way for agreement on long, long-awaited banking union by the year-end.
from The Great Debate:
Germany has once again become the world’s favorite whipping boy, roundly criticized over the past few days by the U.S. Treasury, a top International Monetary Fund official and the European Commission president, among others, for running record trade and current account surpluses that are supposedly detrimental to the European and global economy.
The arguments continue, with the Germans themselves saying that the surpluses are simply the happy result of the nation’s industrial competitiveness and don’t hurt anyone else. Lost in the debate, however, is what’s happening in Berlin right now. As Chancellor Angela Merkel seeks to form a new coalition government, she appears to be on the verge of throwing out some of the very policies that underpin the export boom of the past decade.
from Jack Shafer:
If not yet the consensus opinion, by tomorrow morning most everyone with a keyboard and a connection to the Internet who isn't also a head of state will concede that the ally-on-ally spying by the United States -- revealed in documents leaked by former NSA contractor Edward Snowden to Der Spiegel -- won't matter much in the long run.
This is not to say German Chancellor Angela Merkel has no right to be personally ticked off about the U.S. snooping on her phone calls since 2002. She does. This morning, the Wall Street Journal reported that upwards of 35 world leaders were spied on by the U.S. They have a right to be ticked off, too, but the protests are largely contrived. As Max Boot and David Gewirtz wrote in Commentary's blog and ZDNet, respectively, nations have traditionally spied on allies both putative and stalwart. One excellent reason to spy on an ally, Gewirtz notes, is to confirm that the ally is really an ally. Allies sometimes become adversaries, so shifting signs must be monitored. Likewise, allies may be allies, but they always have their disagreements. What better way to prevent unpleasant surprises from an ally than by monitoring him? Boot quotes Lord Palmerston, the 19th century British foreign minister and prime minister, on this score: “We have no eternal allies, and we have no perpetual enemies. Our interests are eternal and perpetual, and those interests it is our duty to follow.”
A two-day EU summit kicks off in Brussels hamstrung by the lack of a German government.
Officials in Berlin say they want to reach a common position on a mechanism for restructuring or winding up failing banks by the end of the year but with an entire policy slate to be thrashed out and the centre-left SPD saying the aim is to form a new German administration with Angela Merkel’s CDU by Christmas, time is very tight.
Angela Merkel’s CDU and the centre-left SPD will begin formal coalition talks in Germany this week after a meeting of 230 senior SPD members gave the go-ahead on Sunday.
To win the vote, the SPD leadership pledged to secure 10 demands it called "non-negotiable", including a minimum wage of 8.50 euros per hour, equal pay for men and women, greater investment in infrastructure and education, and a common strategy to boost euro zone growth.
Angela Merkel’s CDU and the centre-left SPD have agreed to begin formal coalition talks conditional on securing support from a meeting of 200 senior SPD members scheduled for Sunday. The party is scarred by its experience of coalition in the last decade, when its support slumped, but it’s probably the lesser of two evils since a new vote would be quite likely to increase Merkel’s support. She only just missed out on a rare overall majority first time around.
Assuming Sunday’s vote gives assent, talks proper will start on Wednesday. Hold your horses though. An entire policy slate will have to be thrashed out so the betting is an administration won’t be in place until late November at the earliest. In the meantime, euro zone policy negotiations are pretty much on hold.